ISO-NE PUBLIC

M A R C H 9 , 2 0 1 7 | P R O V I D E N C E , R I

Mary Louise “Weezie” Nuara E X T E R N A L A F F A I R S R E P R E S E N T A T I V E

Rhode Island House Committee on Environment and Natural Resources

ISO New England Overview and Regional Update

ISO-NE PUBLIC

Overview of Presentation

• About ISO New England

• Major Responsibilities

• Electric Grid at a Glance

• Strategic Planning Initiatives

• Renewable Energy Development and Integration

• Closing Thoughts

• Appendix: Background Information

2

ISO-NE PUBLIC

3

What Are Independent System Operators and How Did We Get Here?

• New England’s electric power industry has changed dramatically over the past few decades

• The industry once consisted of vertically-integrated utilities that handled every aspect of supplying electricity: generating it, transmitting it, distributing it to retail customers, and planning for future reliability

• Orders by the Federal Energy Regulatory Commission (FERC) paved the way for electric restructuring

• Soon after, Independent System Operators (ISOs) were created to establish competitive wholesale electricity markets and ensure reliable power system operations

Note: The Federal Energy Regulatory Commission (FERC) is an independent agency that regulates the interstate transmission of natural gas, oil, and electricity.

ISO-NE PUBLIC

ISO New England (ISO) Has Two Decades of Experience Overseeing the Region’s Restructured Electric Power System

• Regulated by the Federal Energy Regulatory Commission

• Reliability Coordinator for New England under the North American Electric Reliability Corporation

• Independent of companies in the marketplace and neutral on technology

4

ISO-NE PUBLIC

Reliability Is the Core of ISO New England’s Mission Fulfilled by three interconnected and interdependent responsibilities

Overseeing the day-to-day operation of New England’s electric power generation and transmission system

Developing and administering the region’s competitive wholesale electricity markets

Managing comprehensive regional power system planning

5

ISO-NE PUBLIC

A Range of Generation and Demand Resources Are Used to Meet New England’s Energy Needs

• 350 generators in the region

• 30,500 MW of generating capacity

• 13,250 MW of proposed generation in the ISO Queue

– Mostly natural gas and wind

• 4,200 MW of generation has retired or will retire in the next five years

• 600 MW of active demand response and 1,900 MW of energy efficiency with Capacity Supply Obligations in the Forward Capacity Market (FCM)*

30,500

2,500

13,250

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

ExistingGeneration

Existing DemandResources

ProposedGeneration

Existing and Future Resources (MW)

6

* In the FCM, demand-reduction resources are treated as capacity resources.

ISO-NE PUBLIC

New England’s Transmission Grid Is the Interstate Highway System for Electricity

• 9,000 miles of high-voltage transmission lines (115 kV and above)

• 13 transmission interconnections to power systems in New York and Eastern Canada

• 17% of region’s energy needs met by imports in 2016

• $8 billion invested to strengthen transmission system reliability since 2002; $4 billion planned

• Developers have proposed multiple transmission projects to access non-carbon-emitting resources

New Brunswick

Hydro Québec

New York

7

ISO-NE PUBLIC

ISO New England Administers Fair and Efficient Wholesale Electricity Markets

Energy Market

Forward Capacity Market

Ancillary Markets

Daily market for wholesale customers to buy and sell electric “energy”

ISO determines capacity needs three years into the future and resources compete to sell capacity to the system through annual forward capacity auctions

Resources are compensated for providing regulation services and reserves to ensure reliability in real time

12.1

5.9

7.3 6.7

5.2

8.0

9.1

5.9

4.1

1.5

1.8

1.6 1.3

1.2

1.0

1.1

1.1

1.2

$0

$2

$4

$6

$8

$10

$12

$14

$16

2008 2009 2010 2011 2012 2013 2014 2015 2016*

Energy Market

Ancillary Markets

Capacity Market

Annual Value of Wholesale Electricity Markets (in billions)

8

* 2016 wholesale electricity market values are preliminary and subject to reconciliation

ISO-NE PUBLIC

Wallingford (90 MW) Combustion Turbines

Commercial: June 1, 2018

• Roughly 3,000 MW of new gas-fired generation have come forward in recent auctions

Footprint (674 MW) Combined-Cycle

Gas Turbine Commercial: June 1, 2017

Towantic (725 MW) Combined-Cycle Gas Turbine

Commercial: June 1, 2018

Medway (195 MW) Combustion Turbine

Commercial: June 1, 2018

9

The Forward Capacity Market Is Attracting Efficient and Fast-Starting Resources

Clear River Energy Center (485 MW) Combined-Cycle Gas Turbine

Commercial: June 1, 2019

Canal (333 MW) Combustion Turbine

Commercial: June 1, 2019

Bridgeport (484 MW) Combined-Cycle Gas Turbine

Commercial: June 1, 2019

ISO-NE PUBLIC

ISO New England Is Focused on Developing Solutions to the Region’s Top Reliability Risks

• Inadequate Natural Gas Infrastructure

– New England is challenged to meet electricity demands with existing natural gas infrastructure, particularly during the winter

• Power Plant Retirements

– New England will need new ways to meet peak demand as aging plants close

• Renewable Resource Integration

– Maintaining reliability as increasing levels of distributed generation and intermittent resources come online

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ISO-NE PUBLIC

New England Has Seen Dramatic Changes in the Energy Mix: From Coal and Oil to Natural Gas

31%

22% 18%

15%

7% 8%

31%

1% 2%

49%

7% 10%

Nuclear Oil Coal Natural Gas Hydro Renewables

2000 2016

Percent of Total Electric Energy Production by Fuel Type (2000 vs. 2016)

Source: ISO New England Net Energy and Peak Load by Source Renewables include landfill gas, biomass, other biomass gas, wind, solar, municipal solid waste, and miscellaneous fuels

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ISO-NE PUBLIC

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Natural Gas Is the Dominant Fuel Source for New Generating Capacity in New England

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Natural Gas

Fuel Cell

Hydro

Solar

Biomass

Nuclear (uprate)

Wind

Oil

Note: New generating capacity for years 2016 – 2019 includes resources clearing in recent Forward Capacity Auctions.

Cumulative New Generating Capacity in New England (MW)

ISO-NE PUBLIC

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New England Has Relatively Few Interstate Natural Gas Pipelines and Few Delivery Points for LNG

ISO-NE PUBLIC

Elec

tric

En

ergy

$/M

Wh

Fu

el $

/MM

Btu

$0

$5

$10

$15

$20

$25

$30

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

Wholesale Electricity at New England Hub (Real-Time LMP) Natural Gas

Monthly Average Natural Gas and Wholesale Electricity Prices in New England

14

Natural Gas and Wholesale Electricity Prices Are Linked A large portion of the region’s fleet uses natural gas for power generation; natural gas typically sets the price for wholesale electricity

Hurricanes hit the Gulf

Before the Recession and

Marcellus Shale gas boom

Winter 2012/2013

Winter 2013/2014

Winter 2014/2015

ISO-NE PUBLIC

The Region Has Lost—and Is at Risk of Losing—Substantial Non-Gas Resources

• Salem Harbor Station (749 MW) – 4 units (coal & oil)

• Vermont Yankee Station (604 MW) – 1 unit (nuclear)

• Norwalk Harbor Station (342 MW) – 3 units (oil)

• Brayton Point Station (1,535 MW) – 4 units (coal & oil)

• Mount Tom Station (143 MW) – 1 unit (coal)

• Pilgrim Nuclear Power Station (677 MW) – 1 unit (nuclear)

• Additional retirements are looming

Major Generator Retirements:

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ISO-NE PUBLIC

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States Have Set Goals for Reductions in Greenhouse Gas Emissions: Some Mandated, Some Aspirational

80% 80% 80% 75%-80%

80% 80% – 95% 75% – 85%

Connecticut MassachusettsRhodeIsland Maine

NewHampshire Vermont NEG-ECP

Percent Reduction in Greenhouse Gas (GHG) Emissions Economy Wide by 2050*

Aspirational Goal

0%

* MA, RI, NH, and VT use a 1990 baseline year for emissions reductions. CT and the NEG-ECP use a 2001 baseline. ME specifies reductions below 2003 levels that may be required “in the long term.” For more information, see the following ISO Newswire article: http://isonewswire.com/updates/2017/3/1/the-new-england-states-have-an-ongoing-framework-for-reducin.html.

100%

The New England states are promoting GHG reductions on a state-by-state basis, and at the regional level, through a combination of legislative mandates (e.g., CT, MA, RI) and aspirational, non-binding goals (e.g., ME, NH, VT and the New England Governors and Eastern Canadian Premiers).

Legislative Mandate

ISO-NE PUBLIC

State Policy Requirements Drive Proposals for Renewable Energy

10% 11%

14% 15%

20%

59%*

0%

5%

10%

15%

20%

25%

ME NH RI MA CT VT

State Renewable Portfolio Standard (RPS)* for Class I or New Renewable Energy by 2020

* State Renewable Portfolio Standards (RPS) promote the development of renewable energy resources by requiring electricity providers (electric distribution companies and competitive suppliers) to serve a minimum percentage of their retail load using renewable energy. Vermont’s Renewable Energy Standard has a ‘total renewable energy’ requirement (reflected above), which recognizes all forms of new and existing renewable energy, and is unique in classifying large-scale hydropower as renewable.

17

ISO-NE PUBLIC

Natural Gas and Wind Power Dominate New Resource Proposals in the ISO Queue Approximately 13,250 MW

Note: Some natural gas proposals include dual-fuel units (oil); megawatts represent nameplate capacity ratings

Source: ISO Generator Interconnection Queue (January 2017) FERC Jurisdictional Proposals Only

Natural Gas,

6,391, 48% Wind,

5,849, 44%

Hydro, 36, <1%

Biomass, 112, 1%

Pump Storage, 66, <1%

Solar, 715, 5%

LFG, 2, <1%

Battery Storage, 77, 1%

ME, 4,444, 34%

NH, 190, 1%

VT, 51, <1%

MA, 3,786, 29%

RI, 1,328, 10%

CT, 3,448,

26%

By Type By State

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ISO-NE PUBLIC

Energy Efficiency Is a Priority for State Policymakers

Ranking of state EE efforts by the American Council for an Energy-Efficient Economy:

– Massachusetts 1

– Vermont 3

– Rhode Island 4

– Connecticut 5

– Maine 11

– New Hampshire 21

• Billions spent over the past few years and more on the horizon

– Nearly $4 billion invested from 2009 to 2014

– ISO estimates $6.6 billion to be invested in EE from 2020 to 2025

2016 State Energy-Efficiency Scorecard

Source: American Council for an Energy-Efficient Economy

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ISO-NE PUBLIC

40

1,918

3,273

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Jan. 2010 Dec. 2016 2025

Me

gaw

atts

(M

W)

Cumulative Growth in Solar PV through 2025 (MWac)

20

ISO New England Forecasts Strong Growth in Solar PV

Note: The bar chart reflects the ISO’s projections for nameplate capacity from PV resources participating in the region’s wholesale electricity markets, as well as those connected “behind the meter.” Source: Final 2016 ISO-NE PV Forecast (April 2016); MW values are AC nameplate.

State Installed Capacity (MWac)

No. of Installations

Connecticut 281.55 23,544

Massachusetts 1,324.77 65,883

Maine 22.14 2,745

New Hampshire 54.30 5,873

Rhode Island 36.81 2,202

Vermont 198.39 7,612

New England 1,917.96 107,859

December 2016 Solar PV Installed Capacity (MWac)

ISO-NE PUBLIC

Energy Efficiency and Solar PV Are Slowing Peak Demand Growth and Flattening Energy Use

Note: Summer peak demand is based on the “90/10” forecast, which accounts for the possibility of extreme summer weather (temperatures of about 94⁰ F). Source: Final ISO New England Energy-Efficiency Forecast 2020-2025 and Final 2016 Solar PV Forecast Details (May 2016)

120,000

125,000

130,000

135,000

140,000

145,000

150,000

155,000

Gross load

Minus PV, EE

Minus PV

Annual Energy Use (GWh) With and Without EE and PV Savings

28,000

29,000

30,000

31,000

32,000

33,000

34,000

35,000

Gross peak

Minus PV, EE

Minus PV

Summer Peak Demand (MW) With and Without EE and PV Savings

The gross peak and load forecast

The gross peak and load forecast minus forecasted “behind-the-meter” (BTM) solar PV resources

The gross peak and load forecast minus forecasted BTM solar PV, minus energy-efficiency (EE) resources in the Forward Capacity Market 2016-2019 and forecasted EE 2020-2025

21

ISO-NE PUBLIC

New England Has Significant Wind Potential

• Population and electric demand are concentrated along the coast in central and southern New England

• 12,000 MW of onshore and offshore wind potential – Preliminary screening eliminated

wind sites near urban areas and sensitive geographic locations (e.g., Appalachian Trail)

• Transmission will be required to connect potential wind resources to load centers in New England Wind zones

Electricity Demand

22

ISO-NE PUBLIC

MA 480 MW

ME 3,080 MW

NH 65

MW

VT 30

MW

All Proposed Generation Developers are proposing to build roughly 13,250 MW of generation, including nearly 6,400 MW of gas-fired generation and more than 5,800 MW of wind

Wind Proposals

Infrastructure Will Be Needed to Deliver Energy from Proposed Resources

Natural gas 48%

Wind 44%

Other 8%

23

Offshore wind MA

2,054 MW

ME 3,676 MW

NH 79

MW

VT 30

MW

Source: ISO Generator Interconnection Queue (January 2017) FERC Jurisdictional Proposals; Nameplate Capacity Ratings

MA 10 MW

Source: ISO Generator Interconnection Queue (January 2017) FERC Jurisdictional Proposals Only; Nameplate Capacity Ratings

ISO-NE PUBLIC

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Closing Thoughts…

• New England’s generation fleet is changing rapidly as older coal, oil and nuclear power plants retire

• Region’s investments in energy efficiency and solar resources are having a significant impact on system planning and operations

• Infrastructure needs continue to be an area of focus for decision makers in New England

ISO-NE PUBLIC

For More Information…

• Subscribe to the ISO Newswire – ISO Newswire is your source for regular news

about ISO New England and the wholesale electricity industry within the six-state region

• Log on to ISO Express – ISO Express provides real-time data on New

England’s wholesale electricity markets and power system operations

• Follow the ISO on Twitter – @isonewengland

• Download the ISO to Go App – ISO to Go is a free mobile application that puts

real-time wholesale electricity pricing and power grid information in the palm of your hand

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ISO-NE PUBLIC

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ISO-NE PUBLIC

ISO-NE INTERNAL USE

ISO-NE PUBLIC

APPENDIX: BACKGROUND INFORMATION

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ISO-NE PUBLIC

There Are Nine ISOs and RTOs in North America

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ISO-NE PUBLIC

Numerous Entities Including an Independent Board Provide Oversight of and Input on ISO’s Responsibilities

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ISO-NE PUBLIC

ISO New England Is Part of a Larger Electric Power System

• Eastern Interconnection spans from Rocky Mountains to East Coast and Canadian Maritimes

– Primarily alternating-current (AC) transmission

– New England linked to rest of Eastern Interconnection via transmission ties to New York and New Brunswick

• Tied to Québec only through direct-current (DC) transmission

• 2003 Blackout ushered in wide-area monitoring and mandatory reliability standards

NERC North American Electric Reliability Corporation

Western Interconnection

ERCOT Interconnection

Eastern Interconnection

NPCC Northeast

Power Coordinating

Council

Québec Interconnection

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ISO-NE PUBLIC

Overall Electricity Demand Is Flattening Due to Energy Efficiency and Behind-the-Meter Solar

• 7.1 million retail electricity customers drive the demand for electricity in New England (14.7 million population)

• Region’s all-time summer peak demand set on August 2, 2006 at 28,130 MW

• Region’s all-time winter peak demand set on January 15, 2004 at 22,818 MW

• Energy efficiency and behind-the-meter solar slow the growth in summer peak demand to 0.3% annually and flatten the growth in overall electricity demand to -0.2% annually

31

Note: Without energy efficiency and solar, the region’s peak demand is forecasted to grow 1.1% annually and the region’s overall electricity demand is forecasted to grow 1.0% annually. Summer peak demand is based on the “90/10” forecast for extreme summer weather.

ISO-NE PUBLIC

32

Solar Power Has a Significant Impact on New England’s Electricity Demand

9,000

9,500

10,000

10,500

11,000

11,500

12,000

12,500

13,000

Estimated Electricity Needs Served by Solar Power Demand Without Solar Power Electricity Demand Seen in Real Time

Solar Power’s Effect on Regional Electricity Demand May 23, 2015

Sunrise Sunset

Meg

awat

ts (

MW

)

ISO-NE PUBLIC

33

Rhode Island Installed Solar PV “Heat Map”

Note: Heat map reflects solar PV installed through August 31, 2016.

ISO-NE PUBLIC

Power Plant Emissions Have Declined with a Changing Fuel Mix

Year NOx SO2 CO2

2001 59.73 200.01 52,991

2014 20.49 11.68 39,317

2015 18.86 9.11 40,312

% Reduction 2001–2015

68% 95% 24%

% Change 2014–2015

8% 22% 2.5%

Reduction in Aggregate Emissions (kilotons/year)

34

Source: 2015 ISO New England Electric Generator Air Emissions Report, January 2017

CO2 emissions rose in 2015 after Vermont Yankee Nuclear Power Station retired in December 2014

ISO-NE PUBLIC

Forward Capacity Market Overview

• Procures resources to meet New England’s forecasted capacity needs three years in the future

• Allows new capacity projects to compete in the market and set the price for capacity in the region

• Selects a portfolio of supply and demand resources through a competitive Forward Capacity Auction (FCA) process

– Resources must be pre-qualified to participate in the auction – Resources must participate and clear in the auction to be paid for

capacity during the capacity commitment period

• Provides a long-term (up to 7-year) commitment to new supply and demand resources to encourage investment

35

ISO-NE PUBLIC

36

Last Month, ISO New England Conducted the Eleventh Forward Capacity Auction (FCA #11)

• FCA #11 was held on February 6, 2017 to procure the capacity resources needed to meet electricity demand in New England during the 2020-2021 Capacity Commitment Period

• The auction concluded systemwide after six rounds of competitive bidding, with a clearing price of $5.30/kW-month, lower than the $7.03/kW-month clearing price in the previous auction (FCA #10)

– The $5.30/kW-month clearing price will be paid to new and existing resources in all three capacity zones, with the exception of imports from New Brunswick

• At $5.30/kW-month, the total value of the capacity market in 2020-2021 will be approximately $2.4 billion

– Down from the estimated $3 billion for the 2019-2020 capacity commitment period (FCA #10)

ISO-NE PUBLIC

37

Forward Capacity Auction #11 Highlights

• The ISO modeled three capacity zones in the auction

– Northern New England Capacity Zone

– Southeastern New England Capacity Zone

– Rest-of-Pool Capacity Zone

• The auction concluded with commitments from 35,835 MW to be available in 2020-2021

• The net installed capacity target to be procured in the auction was 34,075 MW

• No new large generators cleared in the auction, but 640 MW of new energy-efficiency and demand-reduction measures—the equivalent of a large power plant—cleared and will be available in the 2020-2021 timeframe

Northern New England Zone

(VT, NH and ME)

Southeastern New England Zone

(NEMA/Boston and SEMA/RI)

Rest-of-Pool Zone

(WCMA and CT)

ISO-NE PUBLIC

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Overview of Transmission Planning

• As the Regional Transmission Organization, the ISO is required to identify transmission infrastructure solutions that are essential for maintaining power system reliability in New England

• Through an open stakeholder process, the ISO is responsible for the development of long-range plans to address future system needs over the ten-year planning horizon

– Summarized in a Regional System Plan (RSP)

• The transmission planning process is governed by a FERC-approved tariff

• The transmission planning process has been revised to comply with the Federal Energy Regulatory Commission’s (FERC) Order 1000

ISO-NE PUBLIC

Transmission Projects to Maintain Reliability Have Progressed throughout New England

Major 345 kV Projects

• Southwest Connecticut Reliability Project, Phases 1 & 2

• Boston 345 kV Transmission Reliability Project, Phases 1 & 2

• Northwest Vermont Reliability Project, and Vermont Southern Loop Project

• New England East-West Solution – Greater Springfield Reliability Project – Rhode Island Reliability Project – Interstate Reliability Project

• Southeast Massachusetts – Short-term Lower SEMA Upgrades – Long-term Lower SEMA Project

• Maine Power Reliability Program

• Greater Boston Project

Source: RSP Transmission Project List, October 2016; RSP Transmission Project List also includes 115kV projects

39

ISO-NE PUBLIC

Region Has Made Major Investments in Transmission Infrastructure to Ensure a Reliable Electric Grid

$0

$1.1

$1.9

$0.8

$0.4 $0.4 $0.5

$1.4

$0.5

$0.8 $0.6

$2.1

$0.9

$0.4

$0.2

$0

$1

$1

$2

$2

$3

2002 2003-07 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: ISO New England RSP Transmission Project Listing, October 2016 Estimated future investment includes projects under construction, planned and proposed

Cumulative Investment through October 2016 $8.02 billion

Estimated Future Investment through 2020 $4.07 billion

Annual Investment in Transmission to Maintain Reliability (in billions)

40

ISO-NE PUBLIC

How Are Transmission Costs Allocated?

• The New England electric grid is a tightly interconnected system; each state shares in the benefits of reliability upgrades

• The amount of electricity demand in an area determines its share of the cost of new or upgraded transmission facilities needed for reliability

Source: 2015 Network Load by State

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ISO-NE PUBLIC

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Transmission Provides Benefits Beyond Reliability

• Transmission has reduced or eliminated out-of-market costs:

– Reliability agreements with certain generators that were needed to provide transmission support in weak areas of the electric grid

• These often were older, less-efficient generating resources

– Uplift charges to run specific generators to meet local reliability needs

• The markets are increasingly competitive: Easing transmission constraints into import-constrained areas has enabled the ISO to dispatch the most economic resources throughout the region to meet customer demands for electricity

• Transmission congestion has been nearly eliminated

• Transmission facilitates resource transformation: Transmission upgrades have allowed older, less- efficient resources to retire, which helps the states achieve their environmental objectives

ISO-NE PUBLIC

Transmission and Resource Developments Have Reduced Energy and Reliability Costs

$0

$50

$100

$150

$200

$250

$300

$350

$400

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Congestion Costs NCPC (uplift) Reliability Agreements

Note: Congestion is a condition that arises on the transmission system when one or more restrictions prevents the economic dispatch of electric energy from serving load. Net Commitment-Period Compensation is a payment to an eligible resource that operated out of merit and did not fully recover its costs in the energy market. Reliability Agreements are special reliability contracts between the ISO and an approved generator whereby the generator continues to operate, even when it is not economical to do so, to ensure transmission system reliability. Sources: Regional System Plans, ISO-NE Annual Markets Reports

Co

sts

in $

Mill

ion

s

DOE Highlights New England’s Progress

In the Energy Policy Act of 2005, Congress directed the U.S. Department of Energy to conduct a study every three years on electric transmission congestion and constraints.

In its 2009 study, DOE dropped New England from its list of “Congestion Areas of Concern” citing the region’s success in developing transmission, generation, and demand-side resources.

43

ISO-NE PUBLIC

Developers Are Proposing to Move Renewable Energy to New England Load Centers

44

Source: ISO Interconnection Queue (January 2017)

• As of January 1, 2017, seventeen elective transmission projects had been proposed in the ISO Interconnection Queue, totaling more than 10,000 MW of potential transfer capability, including:

– Large-scale hydro resources from eastern Canada, and

– Onshore wind resources from northern New England

• Projects seek to address public policy goals, not reliability needs

• In addition, offshore wind resources are emerging in southern New England

Map is representative of the types of projects

announced for the region in recent years

ISO-NE PUBLIC

12.1

5.9

7.3 6.7

5.2

8.0 9.1

5.9

4.1

1.5

1.8

1.6 1.3

1.2

1.0 1.1

1.1

1.2

0.9

1.1

1.4 1.4

1.5

1.8

1.8

2.0

1.9

$0

$2

$4

$6

$8

$10

$12

$14

$16

2008 2009 2010 2011 2012 2013 2014 2015 2016

Bill

ion

s ($

)

Energy Market Capacity Market Ancillary Markets Transmission Charges RTO Costs

$14.95 billion

$9.07 billion

$10.66 billion

$9.58 billion

$8.06 billion

$11.19 billion

Source: 2016 Report of the Consumer Liaison Group; 2016 wholesale electricity costs are preliminary and subject to reconciliation

$12.45 billion

$9.35 billion

45

New England Wholesale Electricity Costs Annual wholesale electricity costs have ranged from $7.5 billion to $15 billion

$7.52 billion

ISO-NE PUBLIC

(a) Average annual costs are based on the 12 months beginning January 1 and ending December 31. Costs in millions = the dollar value of the costs to New England wholesale market load servers for ISO-administered services. Cents/kWh = the value derived by dividing the dollar value (indicated above) by the real-time load obligation. These values are presented for illustrative purposes only and do not reflect actual charge methodologies.

(b) The wholesale values for 2016 are preliminary and subject to reconciliation. (c) Energy values are derived from wholesale market pricing, and represent the results of the Day-Ahead Energy Market plus deviations from the Day-Ahead Energy Market reflected

in the Real-Time Energy Market. (d) Ancillaries include first- and second-contingency Net Commitment-Period Compensation (NCPC), forward reserves, real-time reserves, regulation service, and a reduction for the

Marginal Loss Revenue Fund. (e) Capacity charges are those associated with the transitional Installed Capacity (ICAP) Market through May 2010 and the Forward Capacity Market (FCM) from June 2010 forward. (f) Transmission charges reflect the collection of transmission owners’ revenue requirements and tariff-based reliability services, including black-start capability and voltage support.

FCM reliability totals are not included in this value. In 2016, the cost of payments made to these generators for reliability services under the ISO’s tariff was $37.5 million. (g) RTO costs are the costs to run and operate ISO New England and are based on actual collections, as determined under Section IV of the ISO New England Inc. Transmission,

Markets, and Services Tariff.

46

New England Wholesale Electricity Costs(a)

2012 2013 2014 2015 2016(b)

$ Mil. ¢/kWh $ Mil. ¢/kWh $ Mil. ¢/kWh $ Mil. ¢/kWh $ Mil. ¢/kWh

Wholesale Market Costs

Energy (LMPs)(c) $5,193 3.9 $8,009 6.0 $9,079 6.9 $5,910 4.5 $4,127 3.2

Ancillaries(d) $56 0.0 $152 0.1 $331 0.3 $210 0.2 $146 0.1

Capacity(e) $1,182 0.9 $1,039 0.8 $1,056 0.8 $1,110 0.8 $1,161 0.9

Subtotal $6,431 4.8 $9,200 6.9 $10,466 8.0 $7,229 5.5 $5,433 4.2

Transmission Charges(f) $1,494 1.1 $1,823 1.4 $1,822 1.4 $1,954 1.5 $1,902 1.5

RTO Costs(g) $139 0.1 $167 0.1 $165 0.1 $165 0.1 $180 0.1

Total $8,064 6.0 $11,190 8.4 $12,453 9.5 $9,348 7.1 $7,515 5.8